Random walk hypothesis in exchange rate reconsidered
Journal
Journal of Forecasting
Journal Volume
25
Journal Issue
4
Pages
275-290
Date Issued
2006
Author(s)
Chu C.-S.J.
Abstract
Abstract An econometric model for exchange rate based on the behavior of dynamic international asset allocation is considered. The capital movement intensity index is constructed from the adjustment of a fully hedged international portfolio. Including this index as an additional explanatory variable helps to explain the fluctuation of the exchange rate and predict better than the competing random walk model. Supporting empirical evidence is found in Germany–USA, Japan–USA, Singapore–USA and Taiwan–USA exchange markets. Copyright © 2006 John Wiley & Sons, Ltd.
SDGs
Type
journal article